appraisals. Neither of these issues is readily resolved by summary adjudication. The first involves what are clearly disputed issues of fact, as pointed out in the discussion of the limitations issue, supra. The second turns upon what is the proper accounting treatment for as yet unrealized value, a question that must be resolved at trial with the aid of expert testimony.
Similarly, whether it was appropriate to discount any valuation of the real estate to reflect the absence of control is by nature a factual question. It should be noted, however, that it is a somewhat different question from that of whether the Profit-Sharing Plan's stock holdings should have been discounted. The company's real estate, it might be argued, could have been sold off separately at any time, at least to the extent that it was excess to the publication business. The inquiry then becomes whether the Plan, which could have exercised the power to effect this sale, held an asset that ought to have been valued at the premium that could have thus been realized.
And that inquiry cannot be undertaken on a motion for summary judgment.
CLAIMS FOR BREACH OF FIDUCIARY DUTY
Plaintiffs charge each group of defendants with having breached, in various ways, fiduciary duties owed participants of the Plan. While none of the claims are ripe for summary adjudication, the Court has examined and will discuss each.
1. Claims Against U.S. News
Plaintiffs allege that U.S. News breached fiduciary duties owed them by failing to scrutinize the reports submitted by American Appraisal. While "fiduciaries need not become experts in the valuation of closely-held stock . . .," Cunningham, 716 F.2d at 1474, they are held to a standard grounded in prudence.
Yet under the facts of the instant case, the contours of such a prudential standard are best delineated by the fact-finder at trial, not by the court on the basis of conflicting record evidence.
Plaintiffs further allege that U.S. News was remiss in not keeping American Appraisal informed of the magazine's plans for developing its real estate. As should be abundantly clear by now, that charge is replete with disputed issues of fact.
2. Claims Against American Appraisal
As discussed previously, American Appraisal is not a fiduciary within the meaning of ERISA. Nevertheless, it may be that American Appraisal is liable for having participated in a breach of trust by U.S. News or the director-defendants.
Yet the extent of that participation, if any, must be determined at trial.
3. Claims Against the Director-Defendants
Plaintiffs claim that, by awarding themselves
large blocks of phantom stock, the director-defendants are guilty of self-dealing and, hence, of having breached fiduciary duties
owed to the Plan participants. In what manner, exactly, plaintiffs were injured is not at all clear. If the phantom stock awards negatively affected the earnings capacity of the magazine's stock and, hence, depressed the level of benefits paid to plaintiffs, the question becomes whether the accounting treatment of such deferred compensation was reasonable, a question that cannot be resolved on the record. If plaintiffs mean to challenge the acceleration of the awards that took place in 1982,
they have no standing to assert a claim, as each of them left the magazine prior to that event. Similarly, plaintiffs have no standing to bring a claim asserting that, as holders of phantom shares, the director-defendants received more than their due of the 1984 sale proceeds. Finally, if the charge is that the phantom stock awards diluted the value of the magazine's Class A and common stock, by increasing the number of shares over which the appraised value of the Company was divided, the charge is open to serious question. At no time did the shares of phantom stock appear in the denominator of that fraction.
Because the record contains conflicting evidence as to each of the claims pressed by plaintiffs, and because there is no settled legal authority resolving any issue thus raised, plaintiffs are not entitled to summary judgment as to any claim arising under ERISA.
DOES ERISA PREEMPT PLAINTIFFS' COMMON-LAW CLAIMS?
A. As to U.S. News and the Director-Defendants
Section 514(a) of ERISA, 29 U.S.C. § 1144(a), provides that, subject to certain exceptions not relevant here, ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described under [the definitional section]."
That preemptive language is to be given broad effect.
Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 105 S. Ct. 2380, 2385, 85 L. Ed. 2d 728 (1985); Shaw v. Delta-Air Lines, Inc., 463 U.S. 85, 98, 103 S. Ct. 2890, 77 L. Ed. 2d 490 (1983); Russell v. Mass. Mut. Life Ins. Co., 722 F.2d 482, 487-88 (9th Cir. 1983), rev'd on other grounds, 473 U.S. 134, 105 S. Ct. 3085, 87 L. Ed. 2d 96 (1985). Yet by its own terms, ERISA preempts state laws only "insofar as they . . . relate to any employee benefit plan." Id. § 514(a), 29 U.S.C. § 1144(a) (emphasis added). A law "relate[s] to" an employee benefit plan, and hence is subject to preemption, "if it has a connection with or reference to such a plan." Shaw, 463 U.S. at 96-97.
The precise reach of ERISA's preemption provision depends upon how the phrase "relate to" is to be construed. In holding that ERISA superseded New York's Human Rights Law and Disability Benefits Law, the Supreme Court stressed in Shaw that
Congress used the words "relate to" in § 514(a) in their broad sense. To interpret § 514(a) to preempt only state laws specifically designed to affect employee benefit plans would be to ignore the remainder of § 514. It would have been unnecessary to exempt generally applicable state criminal statutes from pre-emption in § 514(b), for example, if § 514(a) applied only to state laws dealing specifically with ERISA plans.